You’re Damned if You Don’t Fire Rogue Employees.

Posted: April 15, 2011 in Hiring and Firing, Rogue Employees

Firing employees is hard. It’s usually the last thing any employer wants to do. Corporations are people too (ask the Supreme Court), and they don’t want to put someone out of work, especially in a tough economy, and especially an employee who has a family. I’ve seen time and again employers thinking that they are doing a good deed by keeping an employee on when they know they should terminate the employee. In addition to the title of this blog, I have another cliché truism in employment law: no good deed goes unpunished. The employee for whom you are doing a favor turns around to bite you in the ass.

Some of these employees may even mean well. They think that they are doing a fine job, but really are not. If you fire them after two years of poor, but not declining performance, the employee will wonder why you suddenly fired them and look for a discriminatory motive (human nature being what it is, no one wants to think that they are a poor performer). Employers make this situation even worse when they try to ease the pain of the employee and tell a “white lie” that the company is eliminating the position or something of that nature. As innocent as that may be, a plaintiff’s attorney will turn that around on you and call it a pretext for discrimination.

Potential lawsuits aside, there is one type of employee who must be fired because he can cause great injury to your company. This is the Rogue Employee, who is disgruntled for some perceived injustice and/or plans to steal your clients and otherwise compete with you. A clever Rogue Employee who is hell bent on hurting her employer can do a great deal of damage. Rogue Employees can do any of the following: destroy computer files; bad mouth you to clients; destroy documents; report you to authorities; steal from the company; cause the company to incur expenses or liability; etc., etc. I cannot completely define a Rogue Employee, but (like the famous quote on pornography) you know them when you see them. Actually, that’s not true, because the most destructive Rogue Employee is the one you don’t identify as such.

Especially dangerous are Rogue Employees in positions of trust or authority. The more power they have, the more damage they can do. Some war stories and examples make this clear, which will be a recurring topic in my blog. I’ve had several cases where Rogue Employees embezzled from the company, stole proprietary business information, stole clients, exposed the company to liability, and exposed the company owners to personal financial liability. I’ve even seen Rogue Employees who are actively working for a competitor at the same time they were receiving a paycheck from my client – and funneling business away from my client, causing a double injury.

Employees who have the authority to write checks have the potential to do great mischief. Employee embezzlement is much more common than people think. The ABA Journal recently reported that a Chicago law firm office manager embezzled $884,000 over a seven year period. If it can happen to a law firm, do you think it can’t happen to your business? The office manager was a trusted employee; the firm didn’t know she was a Rogue Employee.

Another example is from Massachusetts and is set forth in the reported decision of Bank of America, N.A. v. Prestige Imports, Inc., 75 Mass. App. Ct. 741 (2009). The case report describes a “sophisticated and complex scheme” whereby an employee stole hundreds of thousands from his employer, a Weymouth, Massachusetts auto dealership, Prestige Imports, Inc. The employee manipulated deposits that Prestige intended to make into accounts at the employer’s bank. This caused loans to Prestige to default, which also impacted the owner who had personally guaranteed the loan. Even after warning signs, he employer did not fire the Rogue Employee. The case report reads as follows:

“[The Bank] called [the company owner] to express concern about a $90,000 Prestige check made payable to [the employee]. Suspicions aroused, [the owner] asked his accounting firm for advice. An accountant investigated the matter and told [the owner] that someone had made unusual adjustments to Prestige’s records. He also advised [the owner] not to allow [the employee] to continue his daily banking transactions and suggested that [the employee] might be stealing money. Despite this advice, [the owner] did not fire [the employee], change his duties, or remove him as a signatory on an account Prestige had opened at another bank that November and utilized for used car transactions.”

A copy of the case report is attached.

It’s hard to believe in hindsight that Prestige would not only keep the employee, but keep him as a signatory on a bank account. But this extreme example shows that employers do not want to believe that trusted employees could so turn against them and cause them such harm. If you have any concern that one of your employees may be a dreaded Rogue Employee, call me, Adam P. Whitney, at 617.338.7000 and I can guide you through what to do about it.

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